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Mr. Lockhart, Old Stories and Shakespeare

After I read the transcript and viewed the video clip of Mr. Lockhart’s remarks on CNBC’s “Squawk Box” in which he said, and I quote: “What we need is about 50 strong regional banks in this country, not 8,000 small ones,” I was reminded of an old story that I am sure many of you have heard.

A man walks up to the attractive, well-dressed lady at the high-society ball and says, “Would you sleep with me for $1 million?” The lady blushes, hesitates and says quietly, “Well, for $1 million, yes, I would.” The man beams and says, “Then would you sleep with me for $20?” The lady turns crimson and slaps the man hard and blurts out, “Certainly not. What do you think I am?” The man smiles and says, “Lady, we have established what you are; we are just haggling over price.”

That story crossed my mind when I heard Mr. Lockhart speak. Of course we all know Mr. James Lockhart, the former Director of the Federal Housing Finance Agency. Days before the government seizure of the housing GSEs, Mr. Lockhart assured the community banks that the GSEs were adequately capitalized and that the markets should not be concerned about their preferred-stock investments. After the GSEs were seized on a Sunday, in a move that shocked the financial world, Mr. Lockhart expressed no regrets that the actions of Treasury and his agency wiped out billions of dollars in community bank equity and directly caused the failure of several community banks—wiping out families and investors and damaging entire communities. Now we see why. Mr. Lockhart apparently has no use for 8,000 community banks and believes a 50-bank system would be far superior. Superior for whom, Mr. Lockhart?

Yes, this is the same Mr. Lockhart who spoke at our annual gathering of community banker leaders. And he spoke in glowing terms about how vital community banks were to our nation’s financial and economic infrastructure. Now, Mr. Lockhart reveals himself— Shakespeare called it “mouth honor.” Honor given in words, but not felt. Mr. Lockhart is nothing more than an elite opportunist. Unfortunately, Washington seems to attract such people, and then they move on to their cushy Wall Street jobs.

Newsflash for Mr. Lockhart—ICBA and community banks are not for sale at any price, because we know the true meaning of integrity, honesty and loyalty. Long after Lockhart is gone, community banks will endure because community banks are the very embodiment of entrepreneurial spirit in the nation. They are expressions of the self reliance that is engrained in our culture. Every community bank president, board member and customer should be enraged at Mr. Lockhart’s public remarks.

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6 thoughts on “Mr. Lockhart, Old Stories and Shakespeare”

I watched the testimony of Mr Timothy Geithner on March 25th, before the Congressional Panel; he was asked repeatedly about the fate of the GSEs preferred stock. He clearly indicated he had no intention to restore the GSEs preferred stock value.
He repeatedly danced around the verbage of “no private gains at the taxpayers’ expense”, which meant the GSEs stock investments were ‘private gains’ and the Treasury meant ‘taxpayers’.
I understand, that individuals and banks alike pay taxes. They are the taxpayers. The Dept of Treasury is a Tax Collector, or Tax Robber. The Dept of Treasury does not have a tax bracket.
Somehow this concept has no meaning to Mr Geithner.
I suggest Mr Fine, you should go over Mr Geithner’s head. It means his boss.

Now, as I am on a path towards justice, let me add some more thoughts:

1. The conservatorship agreement, (or unilateral seizure of private property), was violated many times by the Goverment, the Conservator. The most blatant recent event was to deny the $5 billion tax credits to Fannie Mae. Mr Geithner did not need the approval of Congress to do that, however when asked, ( on March 25th), he said he would need Congressional approval or authorization from Congress to restore GSEs prefered stock value. I do not believe there was a person in the room, who did not realize Mr Geithner was dishonest.

2. The big picture is moral: how morally can you encourage to invest in Goverment Sponsored Enterprise Preferred Stock, and then to liquidate it?

It will happen, I mean in my lifetime, that US government will need taxpayers again ( I mean citizens, banks, etc) to help to invest in some form of government entity. Such a scenario will happen, as the US will not be able to pay its debt without help of its taxpayers( I mean real taxpayers). If FNM and FRE prefered(and common) stock is liquidateed, then nobody for generations will support this goverment again.